Inputs to Development Appraisals

Question 1

What is Gross Development Value (GDV)?

Answer 1

• GDV is the capital value or total revenue of the completed scheme at today’s valuation date.
• It is based on current market rents, yields, and comparable sales evidence.
• It should reflect tenant incentives, rent‑free periods, and appropriate marketing and disposal periods.

Question 2

What information is typically required to estimate GDV?

Answer 2

• Accurate floor areas measured using plans or CAD outputs.
• Comparable evidence for rents, yields, and capital values.
• Allowances for incentives, voids, marketing periods, and purchaser’s costs (for commercial property).
• Understanding of likely tenant demand and attainable lease terms.

Question 3

What are Total Development Costs (TDC)?

Answer 3

• TDC represent all costs required to deliver the scheme, including site preparation, planning obligations, construction, fees, contingency, marketing, and finance.
• They are deducted from GDV to calculate profit or residual land value.

Question 4

What is included in site preparation costs?

Answer 4

• Demolition and clearance.
• Remediation and contamination treatment.
• Earthworks, levelling, and enabling works.
• Provision of utilities and site access.
• Fencing and security for the site.

Question 5

What planning‑related costs can affect a development appraisal?

Answer 5

• Section 106 obligations under the Town and Country Planning Act 1990.
• Community Infrastructure Levy (CIL) charges.
• Affordable housing quotas and tenure mix requirements.
• Section 278 agreements for highway works.
• Planning application fees, Building Regulations fees, and required specialist reports (e.g. Environmental Assessments).

Question 6

What sources can be used to estimate construction (build) costs?

Answer 6

• Quantity Surveyor cost plans or bills of quantities.
• RICS BCIS index data (usually provided on a GIA basis).
• Client‑provided costs from previous schemes.
• Spons Price Book or Building Surveyor estimates.

Question 7

What professional fees must be included in TDC?

Answer 7

• Architects, project managers, structural engineers, and M&E consultants.
• Fees commonly total 10–15% of construction costs plus VAT.
• Cost of CDM Principal Designer must also be included.

Question 8

What is a contingency allowance in development appraisal?

Answer 8

• A provision for unforeseen construction or cost‑related risks.
• Typically between 5–10% of build costs depending on project complexity.
• Helps manage uncertainty in ground conditions, design changes, or inflation risk.

Question 9

What marketing and disposal costs may apply to a development scheme?

Answer 9

• Sales agents’ fees (usually 1–2% of GDV).
• Letting agents’ fees (often around 10% of initial annual rent).
• EPC costs, warranty cover (e.g. NHBC), and marketing materials.
• Legal fees for sales or lettings.